Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

The estimated fair market value of MGE Energy's and MGE's financial instruments are as follows:

		2014				2013
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	65,755	$	65,755	$	68,813	$	68,813
Liabilities:
Short-term debt - commercial paper		7,000		7,000		-		-
Long-term debt*		399,690		457,420		403,793		432,010
MGE
Assets:
Cash and cash equivalents	$	4,562	$	4,562	$	14,808	$	14,808
Liabilities:
Short-term debt - commercial paper		7,000		7,000		-		-
Long-term debt*		399,690		457,420		403,793		432,010
*Includes long-term debt due within one year.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis for MGE Energy and MGE.

	Fair Value as of December 31, 2014
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	642	$	-	$	-	$	642
Exchange-traded investments		927		927		-		-
Total Assets	$	1,569	$	927	$	-	$	642
Liabilities:
Derivatives, net(a)	$	55,640	$	1,012	$	-	$	54,628
Deferred compensation		2,832		-		2,832		-
Total Liabilities	$	58,472	$	1,012	$	2,832	$	54,628
MGE
Assets:
Derivatives, net	$	642	$	-	$	-	$	642
Exchange-traded investments		350		350		-		-
Total Assets	$	992	$	350	$	-	$	642
Liabilities:
Derivatives, net(a)	$	55,640	$	1,012	$	-	$	54,628
Deferred compensation		2,832		-		2,832		-
Total Liabilities	$	58,472	$	1,012	$	2,832	$	54,628
	Fair Value as of December 31, 2013
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,787	$	735	$	-	$	1,052
Exchange-traded investments		792		792		-		-
Total Assets	$	2,579	$	1,527	$	-	$	1,052
Liabilities:
Derivatives, net	$	65,680	$	-	$	-	$	65,680
Deferred compensation		2,364		-		2,364		-
Total Liabilities	$	68,044	$	-	$	2,364	$	65,680
MGE
Assets:
Derivatives, net	$	1,787	$	735	$	-	$	1,052
Exchange-traded investments		431		431		-		-
Total Assets	$	2,218	$	1,166	$	-	$	1,052
Liabilities:
Derivatives, net	$	65,680	$	-	$	-	$	65,680
Deferred compensation		2,364		-		2,364		-
Total Liabilities	$	68,044	$	-	$	2,364	$	65,680
(a)     These amounts are shown gross and exclude $2.2 million and $0.2 million of collateral that was
posted against derivative positions with counterparties as of December 31, 2014 and 2013, respectively.

Significant Unobservable Inputs

The following table presents the significant unobservable inputs used in the pricing model as of December 31:

	Model Input
Significant Unobservable Inputs	2014	2013
Basis adjustment:
On peak	98.1%	94.2%
Off peak	95.0%	92.6%
Counterparty fuel mix:
Internal generation	50%-70%	50%-70%
Purchased power	50%-30%	50%-30%

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for both MGE Energy and MGE.

(In thousands)		2014		2013		2012
Balance as of January 1,	$	(64,628)	$	(72,346)	$	(40,661)
Realized and unrealized gains (losses):
Included in regulatory liabilities (assets)		10,642		7,718		(31,685)
Included in other comprehensive income		-		-		-
Included in earnings		5,129		(2,618)		(5,005)
Included in current assets		-		(108)		-
Purchases		26,382		23,726		13,370
Sales		(125)		(2)		92
Issuances		-		-		-
Settlements		(31,386)		(20,998)		(8,457)
Transfers in and/or out of Level 3		-		-		-
Balance as of December 31,	$	(53,986)	$	(64,628)	$	(72,346)
Total gains (losses) included in earnings attributed to the
change in unrealized gains (losses) related to assets and
liabilities held at December 31,(b)	$	-	$	-	$	-

(b)MGE's exchange-traded derivative contracts, over-the-counter party transactions, ten-year purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.

Gains and Losses Included in Income for Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis for both MGE Energy and MGE(b).

(In thousands)
Year Ended December 31,		2014		2013		2012
Purchased power expense	$	5,137	$	(2,618)	$	(5,005)
Cost of gas sold expense		(8)		-		-
Total	$	5,129	$	(2,618)	$	(5,005)

(b)MGE's exchange-traded derivative contracts, over-the-counter party transactions, ten-year purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.